[Calc Review] Help me analyze this deal

[Jerry Villa]

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*This link comes directly from our calculators, based on information input by the member who posted.

Hey BPers... taking up Brandon's challenge to do analyze 1 deal a day. So ran the numbers on this one. I wanted to quickly run by the numbers and get some input if 1) my approach was correct and 2) best practice for those numbers (I will be researching them myself also). I know this property (based on my numbers) doesn't make it a good deal. But I want to learn how to better process them. A lot of these numbers Brandon says to just do a combination of knowledge, quick online research and rough estimate:

Purchase price: $259,900 (this is pretty simple but I noticed in other BP's videos they will change the purchase price, either lower or higher, is there rhyme/reason to this?)

ARV: $300k (This is one the main questions I have, how do you quickly come to this number)

Purchase Closing Cost: $12,995 (I put in 5% of purchase price based on what I read)

Estimated Repair Cost: $15,000 (I've owned a house and built tiny houses but never to this magnitude, how do you quickly estimate repair costs by just looking at an online listing?)

Down Payment of purchase price: 10% (I know this varies depending on how you're doing the deal but if this is a traditional bank loan, what are the average percentages asked to put down?)

Since this analysis doesn't involved hard money lenders, in MOST cases bank mortgages don't ask for points or other charges that we should be aware about or what are your thoughts?

Amortized: 30yrs

Refi After: 6mons

Rehab Time: 2mons

Also since the approach is the BRRR method, can the initial purchasing money be a traditional mortgage (and not hard money) so it can be a 30yr term. Is it possible to refinance after 6mons?

REFINANCE LOAN DETAILS

Loan Amount: $210,000 (this is one of the numbers I didn't know how to come about. I read we should probably be doing 70% of the ARV right? Any input would help here)

Closing Costs: $10,500 (I put in 5% of new loan amount $210,000)

Include PMI: No (I put NO because this loan is 70% of the ARV. Notes here says it should be added if there is less than 20% downpayment in place. I didn't quite follow this.)

Amortized Yrs: 30

INCOME

Total Monthly Rent: $1500 (this is a 2 bedroom property, figured I could get $750 each room or the whole place for this amount. I researched on craigslist for the area to get an idea.)

FIXED LANDLORD-PAID EXPENSES

Electricity: $0 (tenant pays in most cases right?)

Water & Sewer: $0 (tenant pays in most cases right?)

PMI: $0 (should I be adding this in, sounds like the same as above under refi)

Garbage: $0 (tenant pays in most cases right?)

HOAs: $0 (didn't see any)

Monthly Insurance : $100 (is there an average estimate for this number, I found postings saying about $50/mon per $100k)

Other Monthly Expenses: $0 (I know this can vary a lot, what are ya'lls thoughts on what you often put here)

VARIABLE LANDLORD-PAID EXPENSES

these are based on Brandon's rough estimates:

Vacancy: 5%

Repairs: 6%

CapEx: 7%

Management: 10%

FUTURE ASSUMPTIONS

Annual Income Growth: 1%

Annual PV Growth: 1%

Sales Expenses: 8%

This is a lot of info, though I just need some input on the couple of numbers that I dont quite follow. Thanks for your input.

[Brian Mcmenamin]

@Jerry Villa Let me try to unpack some of your questions here:

I like to start out with Purchase price the same as listing price. It gives me an idea of where this asset sits as an investment. It is important to understand your investment market because sometimes your offer can be right at listing price, but market is hot and you will find yourself in a bidding war. 

Easiest way for me to calculate ARV is to take at least 3 already sold homes in the area. You can find these through zillow recently sold homes. Do a cost comparison between your potential investment and other sold homes. I go with bedroom and bathroom comparison rather than square footage comparisons. It takes awhile to get used to this process, but you will get the hang of it.

I think repair costs go back to knowing your market and getting a deal under your belt. I personally inflate this number to give me some cushion. You can also use homewyse.com to help with your calculations. 

Banks like when you put down 20%. You can always go less, but 20% makes them comfortable. For an investment property, you can find yourself putting down 25%. If you put down less than 20% be ready to pay PMI (Private Mortgage Insurance)

skipping ahead....

Plan on paying sewer expenses. My tenants pay for water, but I usually end up paying for sewer. You can have them pay it, but for my duplex I take care of that expense. 

I would add in management expenses unless you plan on managing it yourself. Even if you manage yourself it is always nice to have that expense there in the event you hire a manager. 

I hope this helps. Let me know if you have any other questions.